ICE Brent

ICE Brent: ICE Brent crude oil prices dropped from the mid-$80s in early November to the mid-$70s in the middle of December. Traders focused on easing physical oil market balances and inventory builds. While not the focus of this report, in recent days, prices have rebounded by $3-5 due to threats to shipping and oil trade flows in the Red Sea.

Supply outside OPEC+ has been growing rapidly, driven by the U.S., Brazil, and Guyana; Canadian supply has also recovered strongly from last spring’s Alberta wildfires. On the demand side, macroeconomic worries persist, and consensus fundamental forecasts show a significant slowdown in global demand growth next year. The post-COVID rebound/recovery is over, and the world is expected to return to normal rates of oil demand growth in 2024.

In addition, oil markets were skeptical about the implementation of the latest OPEC+ cuts of an incremental 493 kb/d for 1Q24, announced at the end of November. Moreover, even if output is cut as promised, markets are not convinced that the cuts will prevent stockbuilds early next year. Finally, the geopolitical risk premium faded away, as market fears of a broader Middle Eastern conflict subsided.

ICE Dubai (medium sour) vs. ICE Brent

ICE Dubai’s unusual premium to ICE Brent first widened and then weakened in November, before falling back to a more normal discount in the first half of December.

In November, Dubai prices were supported by OPEC+ production cuts. At the same time, ample supplies in the Atlantic Basin weighed on Brent prices, as described above. In December, Asian demand eased, which dampened Dubai prices. Chinese crude purchases and refinery crude runs both slowed, as import quotas for independent refiners ran low.

ICE Murban (light sour) vs. ICE Dubai

ICE Murban’s premium to ICE Dubai weakened through November and reached parity late in the month before recovering modestly. As a high-quality light sour grade, Murban usually commands a premium over medium sour grades.

However, Murban came under pressure as the arbitrage economics improved for competing Atlantic Basin sweet grades (including Midland) moving to Asia. In addition, markets priced in expectations of higher exports of Murban in January due to a major refinery turnaround at Ruwais, Abu Dhabi.

Asian refined product markets

Singapore medium sour cracking margins rebounded in November, as stronger gasoline, naphtha, and fuel oil cracks outpaced the $5 decline in diesel cracks. Weaker crude pricing also helped refining margins. Medium sour cracking margins increased by about 50 cents in November vs. October, according to the International Energy Agency.